BlueHippo appealing decision in McGraw's favor

CHARLESTON, W.Va. (Legal Newsline) - A troubled computer financing company is appealing a federal judge's decision to dismiss its lawsuit against West Virginia Attorney General Darrell McGraw.

BlueHippo Funding, which has been sued by McGraw under the state's Consumer Credit and Protection Act, on Friday filed a notice of its intent to appeal a February decision by U.S. District Judge John Copenhaver dismissing its counterclaim against McGraw. BlueHippo says its methods of advertising are protected by its First Amendment right to free speech.

McGraw alleges the company is acting as a telemarketer without being registered as one, among other things. He received 17 consumer complaints before initiating his investigation.

"(B)oth the 'Temporary Relief' and 'Permanent Relief' sought by the Attorney General is requested not only on the basis of BlueHippo's failure to comply with the registration and security requirements of the Telemarketing Article," Copenhaver wrote.

"Rather, it is based upon other, independent alleged violations of the Act which must first be adjudicated through a "final hearing" on the merits, with the requested relief being considered thereafter.

"BlueHippo does not suggest that a state sovereign is prohibited from seeking appropriate injunctive relief to halt these types of alleged unfair methods of competition or unfair or deceptive acts or practices.

"The circuit court (presiding over McGraw's suit) may never need to reach the question of a remedy for BlueHippo's failure to comply with the registration and security requirements."

BlueHippo is facing several class action suits. Some have been filed in Maryland, California, Arkansas and Oklahoma.

In an 18-count suit originally filed in March 2007 in Kanawha Circuit Court, McGraw is seeking an injunction stopping BlueHippo from doing business in West Virginia. McGraw also seeks a $200,000 bond from the company and $5,000 for each violation of the West Virginia Telemarketing Act.

In the suit, McGraw's office said consumers claim to have paid for computer equipment they never received, or did receive but that did not work. Also, some consumers paid prices much higher than they would have paid at a store. A news release from McGraw states one consumer paid about $1,800 for a computer similar to one she bought at a national retail store for $400.

In the countersuit filed June 25, BlueHippo said its national advertising -- on television, on the Internet and in print - is "protected commercial speech" under the First Amendment.

It also stresses that BlueHippo does not make the first move with consumers.

"BlueHippo did not and does not initiate calls to consumers -- including West Virginia consumers," the complaint says. "Rather, all West Virginia consumers with whom BlueHippo has attempted to enter or has entered into a transaction initiated the telephone contact to BlueHippo."

Copenhaver's decision will be appealed to the U.S. Court of Appeals for the Fourth Circuit in Richmond.

From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.